SEC and Other Regulators Issue Crypto Investment Warnings

The U.S. Securities and Exchange Commission (SEC) and several other top financial regulators have issued several warnings regarding investing in crypto assets as part of this year’s World Investor Week. “The risk of loss for individual investors who participate in transactions involving crypto assets, including crypto asset securities, remains significant,” the regulators stressed.

Crypto Warnings Highlighted in World Investor Week

The SEC’s Office of Investor Education and Advocacy (OIEA) issued an Investor Bulletin on Sept. 29 as part of this year’s World Investor Week. This global campaign, promoted by the International Organization of Securities Commissions (IOSCO), aims to raise awareness about the importance of investor education and protection.

The bulletin is a collaborative effort involving the SEC, the Financial Industry Regulatory Authority (FINRA), the Commodity Futures Trading Commission (CFTC), the National Futures Association (NFA), the Securities Investor Protection Corporation (SIPC), and the North American Securities Administrators Association (NASAA).

The three themes of World Investor Week 2023 are Crypto Assets, Investor Resilience, and Sustainable Finance. Concerning crypto assets, the bulletin highlights several risks related to crypto investing. “Investments in crypto assets can be exceptionally volatile and speculative, and the platforms where investors buy, sell, borrow, or lend these investments might lack important protections,” the bulletin cautions.

“Those offering crypto asset investments or services may not be complying with applicable law, including federal securities laws,” the regulators warned, adding:

Investors who deposit funds or crypto assets with a crypto asset entity might cease to have legal ownership of those assets and might not be able to get those assets back when they want to.

Moreover, the bulletin details that investors in crypto assets face a number of risks, including unregistered offerings, lack of Securities Investor Protection Corporation (SIPC) protection, and fraud. “Fraudsters continue to exploit the rising popularity of crypto assets to lure retail investors into scams, often leading to devastating losses,” the regulators described.

The regulators further explained that to find out if your portfolio, including retirement plans and investment accounts, holds any crypto asset-related investments, you must actively research and ask questions. “Investors should understand if they are being exposed to risky investments involving crypto assets,” they stressed.

The last warning in the bulletin states:

The risk of loss for individual investors who participate in transactions involving crypto assets, including crypto asset securities, remains significant. The only money you should put at risk with any speculative investment is money you can afford to lose entirely.

The regulators additionally advised: “If you are considering a crypto asset-related investment, take the time to understand how the investment works and look for warning signs that it may be a crypto asset investment scam.” They recommended carefully reviewing all materials, asking questions, and watching for “the signs of a fraudulent trading website.”

What are your thoughts on the regulatory guidance concerning cryptocurrency investments? Let us know in the comments section below.

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